A New Political Calculus

Question: What two words made national headlines virtually every day 10 years ago but are seldom heard in Washington today?

Answer: The uninsured.

Has the political calculus changed that much since the huge national debate over universal health insurance in 1993?

The numbers suggest it has.

There were 41 million Americans without health insurance last year, two million more than in 1993.

But there are another 41 million Americans on Medicare, the government’s health care financing program for seniors.

Seniors vote and are politically powerful, but the uninsured have much less political clout.

As a result, seniors are driving today’s health care debate with demands that Washington add coverage for outpatient prescription drugs to their Medicare benefit plan.

The drug benefit is much needed, of course, but the scales seem unevenly balanced between seniors with good coverage and the uninsured with nothing.

But recognizing political reality, the president put $400 billion in his budget over 10 years to provide a prescription drug benefit and modernize the Medicare program.

In contrast, Mr. Bush has allocated $89 billion over the decade to help the uninsured purchase private health insurance.

With less money for the uninsured, it’s essential that Congress spend it the right way.

Political leaders have been struggling for decades to provide citizens with access to health coverage. Legislators have expanded government programs like Medicaid to cover more and more people and have allocated tens of billions of dollars for new programs, like the State Children’s Health Insurance Program.

Despite these attempts, the number of uninsured remains stubbornly high. It seems clear that new approaches are needed.

Mr. Bush has proposed providing refundable tax credits to the uninsured to help them purchase private health insurance. The credits would be worth up to $1,000 a year for individuals and $3,000 for families.

Providing tax credits directly to individuals not only would give them a significant price break on health insurance but also would begin to create a consumer-friendly marketplace in the health sector, which is sorely lacking today.

Empowering consumers with new resources and giving them control over purchasing decisions will force health insurers and providers to cater to individuals, not government bureaucracies or human resource departments as today.

This will lead to innovations in care delivery and health insurance, including less restrictive and less costly policies.

Critics say tax credits of $1,000 and $3,000 aren’t enough since the latest estimates show job-based health insurance cost $3,060 a year for an individual and $7,954 for a family.

But people shopping on their own are finding much less expensive policies.

For example, the on-line brokerage, eHealthInsurance, did a survey of 30,000 people who purchased policies last year and found the average individual policy cost $1,871 and $3,899 for families.

Professor Mark Pauly of the University of Pennsylvania has produced research that shows a credit worth half the value of a decent health insurance policy would reduce the number of uninsured among those eligible by more than half.

This data shows that tax credits could have a big impact. But there is another important piece of the puzzle.

State health benefit mandates and insurance regulations are a significant cost driver in health insurance. They require that insurance policies sold on the open market provide a long list of benefits ranging from hair transplants to marriage counseling.

These mandates all were passed with good intent – to make sure that when people buy health insurance it covers everything they might need.

It’s a worthy goal, but imagine if the government said you can’t buy a car unless it is a fully-loaded Lincoln with all-wheel drive and a satellite locator. It would be a lot better than a Kia, but many people simply wouldn’t be able to afford it.

But this is what states have done with health insurance, and they need to take a serious look at giving uninsured workers a chance to purchase scaled-down policies.

Coupled with deregulation, federal tax credits would empower an army of consumers to shop for the health policies that best suit their personal needs.

Congress surely will consider this issue this session; however, providing broadly-available tax credits for health insurance is not an easy sell because political leaders fear disruption and change.

But the approaches they’ve tried so far aren’t working. It’s time to try a new idea like refundable tax credits to empower consumers to transform the health care marketplace, forcing costs down and increasing ownership of health insurance.

Grace-Marie Turner is president of the Galen Institute, a public policy research organization that focuses on free-market ideas for health reform. She can be reached at P.O. Box 19080, Alexandria, VA 22320, or at galen@galen.org

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Question: What two words made national headlines virtually every day 10 years ago but are seldom heard in Washington today?

Answer: The uninsured.

Has the political calculus changed that much since the huge national debate over universal health insurance in 1993?

The numbers suggest it has.

There were 41 million Americans without health insurance last year, two million more than in 1993.

But there are another 41 million Americans on Medicare, the government’s health care financing program for seniors.

Seniors vote and are politically powerful, but the uninsured have much less political clout.

As a result, seniors are driving today’s health care debate with demands that Washington add coverage for outpatient prescription drugs to their Medicare benefit plan.

The drug benefit is much needed, of course, but the scales seem unevenly balanced between seniors with good coverage and the uninsured with nothing.

But recognizing political reality, the president put $400 billion in his budget over 10 years to provide a prescription drug benefit and modernize the Medicare program.

In contrast, Mr. Bush has allocated $89 billion over the decade to help the uninsured purchase private health insurance.

With less money for the uninsured, it’s essential that Congress spend it the right way.

Political leaders have been struggling for decades to provide citizens with access to health coverage. Legislators have expanded government programs like Medicaid to cover more and more people and have allocated tens of billions of dollars for new programs, like the State Children’s Health Insurance Program.

Despite these attempts, the number of uninsured remains stubbornly high. It seems clear that new approaches are needed.

Mr. Bush has proposed providing refundable tax credits to the uninsured to help them purchase private health insurance. The credits would be worth up to $1,000 a year for individuals and $3,000 for families.

Providing tax credits directly to individuals not only would give them a significant price break on health insurance but also would begin to create a consumer-friendly marketplace in the health sector, which is sorely lacking today.

Empowering consumers with new resources and giving them control over purchasing decisions will force health insurers and providers to cater to individuals, not government bureaucracies or human resource departments as today.

This will lead to innovations in care delivery and health insurance, including less restrictive and less costly policies.

Critics say tax credits of $1,000 and $3,000 aren’t enough since the latest estimates show job-based health insurance cost $3,060 a year for an individual and $7,954 for a family.

But people shopping on their own are finding much less expensive policies.

For example, the on-line brokerage, eHealthInsurance, did a survey of 30,000 people who purchased policies last year and found the average individual policy cost $1,871 and $3,899 for families.

Professor Mark Pauly of the University of Pennsylvania has produced research that shows a credit worth half the value of a decent health insurance policy would reduce the number of uninsured among those eligible by more than half.

This data shows that tax credits could have a big impact. But there is another important piece of the puzzle.

State health benefit mandates and insurance regulations are a significant cost driver in health insurance. They require that insurance policies sold on the open market provide a long list of benefits ranging from hair transplants to marriage counseling.

These mandates all were passed with good intent – to make sure that when people buy health insurance it covers everything they might need.

It’s a worthy goal, but imagine if the government said you can’t buy a car unless it is a fully-loaded Lincoln with all-wheel drive and a satellite locator. It would be a lot better than a Kia, but many people simply wouldn’t be able to afford it.

But this is what states have done with health insurance, and they need to take a serious look at giving uninsured workers a chance to purchase scaled-down policies.

Coupled with deregulation, federal tax credits would empower an army of consumers to shop for the health policies that best suit their personal needs.

Congress surely will consider this issue this session; however, providing broadly-available tax credits for health insurance is not an easy sell because political leaders fear disruption and change.

But the approaches they’ve tried so far aren’t working. It’s time to try a new idea like refundable tax credits to empower consumers to transform the health care marketplace, forcing costs down and increasing ownership of health insurance.

Grace-Marie Turner is president of the Galen Institute, a public policy research organization that focuses on free-market ideas for health reform. She can be reached at P.O. Box 19080, Alexandria, VA 22320, or at galen@galen.org